It’s Fri-Yay For Equity Markets

Friday, 4 January: The downturn on Wall Street continued last night and rolled in to Asia trade. The Nikkei reopened after its extended New Year holiday, falling 2.3% as it caught up with the New Year headlines. News of US/China trade talks next week resulted in major European equity markets opening higher on trade optimism, where they continued over the course of the day.

An increase of 312k nonfarm jobs in December in the US helped Wall Street further add to gains at the open. The jobs increase is the biggest jump since February, while the unemployment rate rose from 3.7% in November to 3.9%. Expectations had been for the US economy to add 176k jobs in December; today’s figures proving the economy remains resilient, despite recent market moves. Sticking with US data, manufacturing PMI fell to 54.4 in December from 54.7 in November. Despite expansion in the sector (a reading above 50 demonstrates expansion, while anything below is a sign of contraction), sentiment is at its lowest level in a year with service providers registering the slowest pace of new orders in over a year.

Further inflating equity performance today has been Fed Chair Jerome Powell’s comments in Atlanta. Sitting alongside his predecessor Janet Yellen, Powell has reiterated the central bank’s patient moves to any interest rate movements over the coming year. Following 4 rate rises in 2018, there had been fears the Fed have been moving too quickly, though today he claimed there “there is no preset path for policy”. Powell was also asked if he would resign if President Trump asked him to, which he answered with one word… “no”. Rumours before Christmas were that President Trump was unhappy with his own appointment, expressing frustration as the Fed’s hike and had even discussed firing Powell.

The FTSE 100 in London reversed year-to-date losses, closing +2.18% at 6,838. Miners benefitted on the index as metal prices increased on the back of Chinese trade optimism. Oil also made traction, brent oil rising >4% at the time of writing at $57.22/bbl as Saudi look to have cut oil production earlier than expected. Gains have pared back from more than $58/bbl after US crude stocks rose last week.

At the close, as mentioned, major indices were higher. France and Germany closed +2.56% and 3.15% higher. On Wall Street, the Dow Jones is sitting +2.63% and S&P 500 +2.77% at the time of writing. The dollar continues to trade lower; the pound back over $1.27 as we speak. The more domestic orientated FTSE 250 closed +2.05%. In the UK, we get Christmas trading updates from the 3 listed supermarkets, as well as M&S, while the politician’s Christmas Holidays come to an end ahead of the upcoming EU vote in Parliament mid-January.